About Stellar (XLM)

Stellar Frequently Asked Questions (FAQ)

What is Stellar (XLM) and how does it work?


Stellar is a blockchain-based payment protocol aimed at facilitating fast, low-cost international monetary transactions. Each transaction on the Stellar network is powered by its native cryptocurrency, known as Lumens (XLM). Stellar operates with a decentralized network of peer-to-peer servers, using a consensus mechanism to synchronize and validate transactions swiftly. Users can issue, transfer, and trade various types of assets on the network, making it a flexible platform for both individual and institutional financial operations.




Who are the founders of Stellar, and what was their vision for the network?


The founders of Stellar are Jed McCaleb and Joyce Kim. Their vision for the network was to create an open-source protocol for value exchange that would enable fast, secure, and nearly free cross-border transactions, aiming to democratize access to the global financial system and promote financial inclusion.




How does Stellar aim to connect the world's financial systems?


Stellar aims to connect the world's financial systems through its decentralized blockchain platform, which facilitates fast, low-cost, cross-border transactions between any pair of currencies. It uses a network of peers that can validate transactions, an open-source protocol, and a decentralized exchange for currency conversion, thus promoting interoperability and accessibility in the global financial landscape.




What are Lumens (XLM) and what role do they play in the Stellar network?


Lumens (XLM) are the native digital currency of the Stellar network. They serve as a bridge currency for facilitating multi-currency transactions and preventing spam by requiring small transaction fees. Lumens also ensure minimal account balances, thus enhancing the network’s efficiency and security.




How does the Stellar network ensure speedy and reliable financial transactions?


The Stellar network ensures speedy and reliable financial transactions through its decentralized and open-source ledger, which is supported by a network of servers. These servers run the Stellar Consensus Protocol (SCP), which allows for quick and secure transaction consensus without relying on a central authority. This leads to fast settlement times, typically within 3-5 seconds. Additionally, the low transaction fees and the ability to handle millions of transactions per day contribute to Stellar's efficiency in processing financial operations.




What security measures are in place to protect the Stellar network?


The Stellar network employs several security measures including encryption, digital signatures, and a consensus protocol to protect against fraudulent transactions. It also uses Multi-Sig for accounts, and SCP (Stellar Consensus Protocol) to keep the network synchronized and secure. Regular security audits and an active developer community contribute to its ongoing security maintenance.




How is the Stellar network different from other blockchain platforms?


The Stellar network differentiates itself by focusing on fast, low-cost cross-border transactions, aiming to serve as a bridge between different currencies and financial systems. It utilizes a consensus protocol called the Stellar Consensus Protocol (SCP), which is unique from the proof-of-work or proof-of-stake mechanisms common in other platforms. SCP provides quicker transaction processing and energy efficiency. Additionally, Stellar's native digital currency, Lumens (XLM), is used to facilitate multi-currency transactions and prevent spam on the network.




What are some use cases for Stellar Lumens (XLM)?


Stellar Lumens (XLM) can be used for cross-border payments, micropayments, asset exchanges, mobile banking, and for serving as a bridge currency to facilitate multi-currency transactions.




What was the reason for Stellar's creation of an open network?


Stellar's open network was created to facilitate a seamless and inclusive financial system, enabling low-cost, fast, cross-border transactions between any pair of currencies and democratizing access to the global economy.




How does Stellar's consensus protocol contribute to the network's operation?


Stellar's consensus protocol, known as the Stellar Consensus Protocol (SCP), facilitates the network's operation by ensuring fast and secure transaction processing. It uses a Federated Byzantine Agreement (FBA) mechanism, which allows for decentralized control, flexible trust, and low latency. Nodes in the network select a set of other trustworthy nodes to form quorum slices, which intersect to reach consensus without the entire network needing to agree. This provides a way for the network to reach agreement on the validity and order of transactions, enabling reliable and efficient operation.




What is the Stellar Development Foundation and what is its role in the ecosystem?


The Stellar Development Foundation (SDF) is a non-profit organization that supports the development and growth of the Stellar network, a platform designed for connecting financial systems globally. Its role is to maintain the Stellar protocol and codebase, support the technical and business communities around Stellar, and promote the adoption of Stellar as a worldwide payment standard.




How has Stellar addressed the challenge of high fees in cross-border payments?


Stellar addresses the challenge of high fees in cross-border payments by leveraging a decentralized blockchain network designed for low-cost financial transactions. It achieves this by utilizing its native digital currency, Lumens (XLM), to facilitate multi-currency transactions, and maintain only nominal transaction fees (a fraction of a cent). This approach significantly reduces the cost compared to traditional banking systems and makes cross-border payments more accessible and affordable.




What is the total supply of Stellar (XLM) coins and how has it changed since launch?


The total original supply of Stellar (XLM) coins was about 105 billion at launch. However, in November 2019, the Stellar Development Foundation burned over 50% of the supply, reducing the total to around 50 billion XLM. As of 2023, the circulating supply is approximately 25 billion due to subsequent smaller burns and the distribution of coins.




Why did the Stellar Development Foundation decide to burn XLM coins and what was the impact?


The Stellar Development Foundation decided to burn XLM coins to make the existing supply more in line with actual network needs, aiming to increase the intrinsic value of the coins and improve market perception. By reducing the total supply, they hoped to create a more active and sustainable ecosystem for XLM. The impact of the burn was an immediate increase in the price of XLM due to the reduced supply, along with a potential long-term improvement of the currency's utility and demand dynamics.




What are 'Anchors' in Stellar's network and what role do they play?


Anchors in the Stellar network act as bridges between different currencies and the Stellar network. They hold deposits of people's funds and issue credits into the Stellar network for those deposits. Those credits can then be traded freely inside the Stellar network and be redeemed at any time with the corresponding anchor. Essentially, they enable users to deposit fiat currency into the network and withdraw it in another form, facilitating a seamless exchange of different forms of money and assets.




How does Stellar facilitate multi-currency transactions within its platform?


Stellar facilitates multi-currency transactions through a built-in decentralized exchange and a feature called 'pathfinding'. Users can send and receive funds in different currencies by leveraging the automatic conversion system that finds the best available exchange rate between any two currencies on the network. This is made possible by the use of liquidity pools and market makers, which ensure that currency exchange can occur seamlessly and instantly during the transaction process.




What kind of partnerships has Stellar formed, and why are they significant for its development?


Stellar has formed partnerships with financial institutions, payment networks, and technology companies. Notable partnerships include IBM for the World Wire project, enabling international transactions in multiple currencies, and collaborations with financial platforms like Stripe and Flutterwave to enhance payment processing and remittances. These partnerships are significant as they help expand Stellar's reach, drive adoption of its network, and demonstrate the practical utility of its technology in real-world financial scenarios.




What was Stellar's original goal when it was released, and how has it shifted?


Stellar's original goal at its release in 2014 was to facilitate cross-border transactions and improve global financial access, inclusivity, and literacy. Its primary focus was on helping unbanked individuals in developing countries. Over time, Stellar has shifted to also support the development of more sophisticated financial tools, smart contracts, and enterprise-level partnerships, aiming to become a more comprehensive platform for digital asset issuance and international transactions for individuals and institutions alike.




How has Stellar utilized its partnerships to find more use cases for XLM?


Stellar has established partnerships with financial institutions and technology providers to increase XLM's utility. For example, it partnered with IBM for the World Wire project, which aimed to simplify cross-border payments using XLM as a bridge currency. Collaborations with payment processors and fintech companies have enabled Stellar to explore new avenues for micropayments, remittances, and mobile money services, further expanding XLM's use cases.




What is Stellar's strategy for empowering blockchain-powered payment services globally?


Stellar's strategy for empowering blockchain-powered payment services globally involves creating an open-source network that enables fast, low-cost, and highly accessible cross-border transactions. By leveraging its decentralized protocol and working with financial institutions and partners, Stellar aims to facilitate inclusive financial services that are available to individuals and businesses everywhere, with a particular focus on underserved and developing markets.